/NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRE
SERVICES/
(TSX-V | OYL)
TORONTO, Feb. 27, 2013 /CNW/ - CGX Energy Inc. (TSX-V - OYL) ("CGX" or
the "Company") announces that it has entered into an agreement with GMP
Securities L.P. ("GMP") dated February 27, 2013 in connection with a
proposed private placement of a minimum of Cdn$35,000,000 (the "Minimum
Offering") and a maximum of Cdn$40,000,000 of units of CGX (the
"Units") at a price of Cdn$0.14 per Unit. Each Unit will consist of one
common share and one common share purchase warrant of the Company (a
"Warrant"), each Warrant being exercisable to acquire one CGX common
share at an exercise price of Cdn$0.20 per share for a period of five
years following the date of issuance of the Units. All common shares
that comprise the Units and any common shares issued on exercise of the
Warrants will be subject to a four month hold period from the date of
issuance of the Units. The private placement is subject to approval of
the TSX Venture Exchange ("TSXV") and other customary closing
conditions.
The Company also announces that it has entered into a binding term sheet
with Pacific Rubiales Energy Corp. ("Pacific Rubiales"), a current
shareholder of the Company, dated February 27, 2013 (the "Pacific
Rubiales Agreement") pursuant to which Pacific Rubiales has agreed to
purchase all of the Units to be issued in the Minimum Offering that are
not subscribed for by other investors. Pursuant to the Pacific
Rubiales Agreement, it is a condition of closing of the placement of
the Minimum Offering to Pacific Rubiales that the Company renegotiate
certain of its agreements with the officers, directors, employees and
consultants of the Company such that the aggregate obligations payable
by the Company or any of its subsidiaries under such agreements on a
change of control of the Company do not exceed Cdn$4,000,000.
The net proceeds from the private placement, after payment of an
advisory fee to GMP, the expenses of GMP relating to its engagement by
CGX and other transaction expenses, will be used by CGX as follows:
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as to approximately US$15,000,000, to meet the Company's current default
payment obligations owing to Repsol Exploración S.A. ("Repsol"), Tullow
Guyana B.V. and YPF S.A. (collectively the "Partners") pursuant to the
Joint Operating Agreement among the Partners to the Georgetown
Petroleum Agreement ("Georgetown PA"),
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as to a maximum of Cdn$4,000,000, for change of control payments to
officers, directors, employees and consultants of the Company who will
no longer be with the Company following closing,
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in satisfaction of a transaction fee payable to the Company's financial
advisor, and
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as to the balance of the net proceeds of the private placement, to fund
expenditures related to the Company's oil and gas exploration
activities and for general corporate purposes.
Subject to the approval of the TSXV, the Company has agreed to pay GMP
an advisory fee of (i) 4% of the gross proceeds of the private
placement in respect of the subscription for Units by Pacific Rubiales,
and (ii) 6% of the gross proceeds derived from the sale of Units
pursuant to the private placement to any investor(s) other than Pacific
Rubiales. The TSXV has advised the Company that it has no objection to
the payment of the fee at this time.
Pacific Rubiales currently owns 144,434,285 common shares representing
35.06% of the Company's issued and outstanding common shares and is an
insider of the Company. Assuming Pacific Rubiales subscribes for all of
the Units pursuant to the Minimum Offering and that no other Units are
sold pursuant to the private placement, Pacific Rubiales will hold 60%
of the Company's issued and outstanding common shares (and
approximately 70% assuming the exercise of all of the Warrants issued
to Pacific Rubiales). Pacific Rubiales also holds warrants which are
exercisable for an additional 42,857,142 common shares of the Company
at an exercise price of Cdn$0.60 per common share until January 9,
2014. As a result, the private placement is a related party
transaction pursuant to Policy 5.9 of the TSXV and Multilateral
Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and triggers the requirement for a valuation and minority
approval unless exemptions therefrom are available. As CGX is not
listed on or quoted on any prescribed exchange listed in MI 61-101, the
transaction is exempt from the formal valuation requirement contained
in MI 61-101 pursuant to section 5.5(b) of MI 61-101. CGX is relying on
the financial hardship exemption from the minority approval requirement
of MI 61-101 contained in section 5.7(e) of MI 61-101 as described in
more detail below.
In its Management's Discussion and Analysis for the nine months ended
September 30, 2012, the Company disclosed that as of November 26, 2012,
the Company had received a default notice in respect of its
Participating Share of joint account expenses for the Georgetown PA in
the amount of US$11,500,000. On January 24, 2013, the Company was
advised by Repsol as operator of the Georgetown PA that the total
default amount had increased to US$14,939,626. The Company has
negotiated a stay of any enforcement proceedings until March 22, 2013.
The Company reports that the current default amount is significantly in
excess of its cash on hand and, accordingly, the Company currently has
insufficient funds to satisfy this obligation and other near term
obligations.
Pursuant to MI 61-101, minority approval is not required for a related
party transaction in the event of financial hardship in specified
circumstances. A special committee (the "Special Committee") of four
"independent directors" of the Company, as defined in MI 61-101, was
constituted to consider the proposed private placement and Pacific
Rubiales investment. The Special Committee (other than John Cullen and
Dennis Pieters who each refrained from voting on the transaction after
being designated as a continuing director by Pacific Rubiales and
thereby having a personal interest in the transaction) has determined
unanimously that the Company is in serious financial difficulty, the
private placement to Pacific Rubiales is designed to improve the
financial position of the Company, and the terms of the private
placement are reasonable in the circumstances of the Company.
Following these determinations and a recommendation to the Board of
Directors, the Board of CGX has made the same determination.
Accordingly, CGX has satisfied the elements of the financial hardship
exemption.
The net proceeds from the private placement will enable the Company to
discharge its immediate obligations under the Georgetown PA Joint
Operating Agreement and to continue to fund its other near term
obligations. The Company expects that further financings will be
necessary to ensure that it can meet its ongoing obligations. The
ability of the Company to continue as a going concern is dependent on
securing the additional required financing, either through issuing
additional equity, debt instruments and/or payments associated with a
joint venture farm-out. There can be no assurances that the Company
will successfully raise additional funds.
Pursuant to the Pacific Rubiales Agreement, upon closing of the private
placement, the board of directors of CGX will be reconstituted as
follows to ensure that a majority of the directors are nominees of
Pacific Rubiales:
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Ronald Pantin
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José Francisco Arata
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Marino Ostos
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Dennis Mills
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Jairo Lugo
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Suresh Narine
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John Cullen
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Dennis Pieters
Ronald Pantin is the Chief Executive Officer and Executive Director of
Pacific Rubiales. Mr. Pantin has worked in the Venezuelan oil industry
for 24 years prior to founding Pacific Rubiales. Mr. Pantin has held a
number of senior positions within Petroleos de Venezuela, S.A.
("PDVSA"), most recently being President of PDVSA Services. Immediately
after PDVSA, Mr. Pantin was President of Enron Venezuela. He began his
professional career with Maraven, an affiliate of PDVSA, where he held
a variety of positions including Exploration and Production Planning
Manager, Petroleum Engineering Manager, Treasurer, Operations Manager
in the Production Division, and Corporate Planning Manager.
José Francisco Arata has been the President and a director of Pacific
Rubiales since 2008. From August 21, 2006 to January 23, 2008, Mr.
Arata was the Chief Executive Officer and a director of Pacific Stratus
Energy Ltd. From July 1997 to February 2006, Mr. Arata was the
Executive Vice President and a director of Bolivar Gold Corp. Mr.
Arata has over 29 years of experience in mineral and oil exploration in
a number of countries in Latin America. He began his professional
career with Maraven, an affiliate of PDVSA, where he held a variety of
positions within the Exploration and Production Department. After
leaving PDVSA, Mr. Arata started a number of private ventures in the
Venezuelan mining industry. Mr. Arata became a director of CGX on June
28, 2012.
Dr. Marino Ostos is Senior Vice President, New Areas for Pacific
Rubiales. He has over 30 years of experience in Exploration and
Production operations and management and was one of the founders of
Pacific Stratus Ventures, later known as Pacific Stratus Energy Ltd.
where he served as President and Chief Operating Officer. Dr. Ostos
holds a Masters and Ph.D. in Geological Sciences from Rice University,
Houston, Texas as well as a Bachelor in Geosciences and a Geological
Engineering Degree. Dr. Ostos became a director of CGX on May 30, 2012.
Dennis Mills is a Canadian businessman and former politician. Mr. Mills
was Vice Chairman and Chief Executive Officer of MI Developments Inc.
from 2004 to 2011, and a Vice-President at Magna International from
1984 to 1987. Mr. Mills served as a Member of Parliament in Canada's
federal parliament from 1988 to 2004. While a Member of Parliament,
Mr. Mills was Parliamentary Secretary to the Minister of Industry from
1993 to 1996, the Parliamentary Secretary to the Minister of Consumer
and Corporate Affairs from 1993 to 1995 and the Chair of the Committee
studying the Industry of Sport in Canada. Mr. Mills was the Senior
Policy Advisor to the Cabinet Committee on Communications (1980-1984),
Advisor to the Minister of Energy (1980-1981), Senior Advisor to the
Minister of Multiculturalism (1980), and Senior Communications Advisor
to the Prime Minister of Canada, The Right Honourable Pierre Elliott
Trudeau (1980-1984).
Dr. Jairo Lugo is Senior Vice President, Exploration of Pacific
Rubiales. From 2004 to January, 2008, he was the Executive Vice
President, Exploration of Pacific Stratus Energy. Dr. Lugo was
Director of Exploration of Arauca Energy Group from April, 2003 to
October, 2004, Exploration coordinator for PDVSA from 2000-2002, G&G
Manager for PDVSA-CVP from 1998-2000, and also held various exploration
geologist positions at PDVSA from 1990-1998.
Due to the Company's immediate need for financing in order to carry on
its business and achieve its business objectives, the parties
contemplate closing the private placement as soon as possible, however
not later than March 11, 2013 unless otherwise agreed to by Pacific
Rubiales, GMP and CGX. As such, in the Company's view, it will be
necessary for the Company to file the material change report with
respect to the proposed transaction less than 21 days before the
expected closing date of the private placement.
CGX has been advised by Pacific Rubiales that Pacific Rubiales intends
for CGX to remain a public company after completion of the financing.
The Units when issued will not be registered under the U.S. Securities
Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or applicable exemption from the
registration requirements.
Dr. Suresh Narine, Executive Director of CGX, stated, "Over the last 15
years, CGX has been the most active explorer for hydrocarbons in
Guyana. This financing led by Pacific Rubiales provides a new base to
allow a high level of exploration to continue in our newly re-issued
Corentyne, Demerara and Berbice Licences, with continued participation
by the other CGX shareholders. Guyanese leadership at the Board level
and in management will continue, unique amongst companies currently
actively exploring in Guyana. Pacific Rubiales will add broad global
experience, with a very successful track record in exploration."
About CGX Energy
CGX is a Canadian-based oil and gas exploration company focused on the
exploration of oil in the Guyana-Suriname Basin, an area in which the
United States Geological Survey estimated a Pmean oil resource
potential of 13.6 billion barrels in their Assessment of Undiscovered
Conventional Oil and Gas Resources of South America and the Caribbean,
2012. CGX is managed by a team of experienced oil and gas and finance
professionals from Guyana, Canada, the United States and the United
Kingdom.
About Pacific Rubiales
Pacific Rubiales is a Canadian company and producer of natural gas and
crude oil, owns 100% of MetaPetroleum Corp., which operates the
Rubiales, Piriri and Quifa heavy oil fields in the Llanos Basin, and
100% of Pacific Stratus Energy Colombia Corp., which operates the La
Creciente natural gas field in the northwestern area of Colombia.
Pacific Rubiales has also acquired 100% of PetroMagdalena Energy Corp.,
which owns light oil assets in Colombia, and 100% of C&C Energia Ltd.,
which owns light oil assets in the Llanos Basin. In addition, the
Company has a diversified portfolio of assets beyond Colombia, which
includes producing and exploration assets in Peru, Guatemala, Brazil,
Guyana and Papua New Guinea. Pacific Rubiales common shares trade on
the Toronto Stock Exchange and La Bolsa de Valores de Colombia and as
Brazilian Depositary Receipts on Brazil's Bolsa de Valores Mercadorias
e Futuros under the ticker symbols PRE, PREC, and PREB, respectively.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER
(AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE)
ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Forward-Looking Statements:
This press release contains forward-looking statements. More
particularly, this press release contains statements that include, but
are not limited to, the timing of the private placement, the
anticipated use of proceeds, the proposed changes to the Board of
Directors and management of CGX and the receipt of required stock exchange approvals.
Forward-looking statements are frequently characterized by words such
as "plan", "expect", "project", "intend", "believe", anticipate",
"estimate", "may", "will", "would", "potential", "proposed" and other
similar words, or statements that certain events or conditions "may" or
"will" occur. The forward-looking statements are based on certain key
expectations and assumptions made by CGX. Although CGX believes that
the expectations and assumptions on which the forward-looking
statements are based are reasonable, undue reliance should not be
placed on the forward-looking statements because CGX can give no
assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very nature
they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of
factors and risks. In addition to other risks that may affect the
forward-looking statements in this press release and those set out in
CGX's management discussion and analysis of the financial condition
and results of operations for the three and nine month periods ended
September 30, 2012, the closing of the private placement could be
delayed if CGX is not able to obtain the necessary stock exchange
approval on the timelines it has planned and the private placement will
not be completed at all if this approval are not obtained or some other
condition to the closing is not satisfied. Accordingly, there is a risk
that the private placement will not be completed within the anticipated
time or at all. The forward-looking statements contained in this press
release are made as of the date hereof and CGX undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
SOURCE: CGX Energy Inc.
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